Global Brands Group Holding Ltd. and Hollywood powerhouse Creative Artists Agency are forming a joint venture they are billing as “the world’s largest brand management company,” spanning the spheres of lifestyle, celebrity and entertainment.
The JV, called CAA-GBG Global Brand Management Group, combines Global Brands’ small but strategically significant Brand Management division with CAA’s portfolio of celebrity clients, corporate brands and licensing expertise. Clients of the joint venture will include Coca-Cola, Jeep, Hershey’s, Jennifer Lopez, Eva Longoria and the Bob Marley Estate. It will work on areas such as product development, retail expansion and franchising/licensing deals to expand brands across a myriad of product categories such as apparel, accessories, home items, beauty and food.
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“Every celebrity is seemingly pointed back to CAA,” said Bruce Rockowitz, chief executive officer and vice chairman of Global Brands, who added that the joint venture will bring a host of new brands to a global audience, especially Chinese consumers, and develop new products suited for Asian tastes. “We have a very strong set up in Asia.”
CAA, perhaps the world’s most famous entertainment and sports talent agency, already has experience with celebrity-branded consumer goods businesses. Global Brands said CAA has developed and managed more than 100 licensing programs on behalf of the agency’s clients, including Bethenny Frankel’s Skinnygirl; Eva Longoria Home for J.C. Penney; Kate Hudson’s Fabletics and Kelly Ripa Home for Macy’s. CAA’s celebrity roster includes Julia Roberts, Meryl Streep, Julianne Moore, Brad Pitt and Tom Cruise.
Rockowitz declined to talk about which celebrities he’s most excited to work with but said he’s enthusiastic about CAA’s entire roster of personalities.
“The obvious people are the people who connect fashion and social media, that have a global appeal,” he said, declining to give a sales forecast for the new company.
Global Brands, a spinoff of sourcing giant Li & Fung, is taking a 72.7 percent stake in the venture via its wholly owned U.K. subsidiary while CAA controls the remaining 27.3 percent of the venture. The Hong Kong-based company said it is not making and cash payments to form the partnership. After seven years, CAA can require Global Brands to buy out its shares in the venture, Global Brands said.
Rockowitz said the company had been talking to CAA for “well over a year” about the synergies between the two companies. Global Brands’ strength in Asian markets, especially China, complements CAA’s American-centric business model and paves the way for the two companies to expand American brands’ international exposure to a whole new crop of consumers, he said.
“This is actually completing a platform. And that platform is taking CAA’s U.S. platform and combining it with our international platform and really being the global player in this business,” he said. Global Brands’ Brand Management business was “neck and neck” with New York-based IMG before the CAA deal and has since surpassed it in size, said Rockowitz, whose connections to the celebrity world extend beyond his professional life. (He is married to Hong Kong pop star Coco Lee.)
Brand Management accounts for just three percent of Global Brands’ annual revenue. That amounts to $103.62 million in fiscal 2014. The division’s earnings before interest, taxes, depreciation and amortization came in at $19.6 million last year, or 18.9 percent. Global Brands’ diversification into brand management comes at a time when its core apparel and accessories businesses — heavily exposed to the North American market — are feeling the pinch in terms of profitability.
On Wednesday, the company said it posted net profit of $17 million for the 15 months ended March 31 — Global Brands is in the process of altering the end of its fiscal year. That’s slightly less than a sixth of the net profit it posted in the twelve months ended Dec. 31, 2014. Operating profit slid 51.3 percent to $75 million. At the same time, sales grew 19.2 percent to $4.12 billion. Global Brands said its margins suffered as these transitional figures included the first quarter of 2016, which is traditionally a loss-making quarter, and it exited underperforming businesses.
Global Brands’ Brand Management portfolio includes brands Global Brands owns — like Frye and Aquatalia — and brands it holds licensing deals with such as JLO Jennifer Lopez, Juicy Couture, Marc Ecko Cut & Sew, Skechers, Coca-Cola, Hershey’s and Teenage Mutant Ninja Turtles.
Global Brands said CAA-GBG will have 24 offices in 20 countries. Perry Wolfman, head of CAA’s licensing division, will serve as ceo of the new company, while Jared Margolis, currently president of Global Brands’ Brand Management Group, will be president.
The CAA JV echoes a similar celebrity-centric deal Global Brands forged back in 2014, when it linked up with former soccer superstar David Beckham and his business partner Simon Fuller. The parties formed a JV to develop Beckham’s own brand globally as well as that of other sports and entertainment stars. The Beckham JV will remain separate to the CAA venture but it might work with CAA-GBG on certain licensing deals and product diversification, Rockowitz said.
Global Brands said the terms of the deal were based on the financial performance of both businesses forming the joint venture. Global Brands said the assets of the brand management business it is conferring to the joint venture total approximately $55.5 million as of Dec. 31.
The value of the CAA assets being conferred to the JV is nil while CAA’s Licensing Business generated an adjusted EBITDA of approximately $7.3 million for the year ended Sept. 30, according to Global Brands.